Correlation Between British American and ES Ceramics
Can any of the company-specific risk be diversified away by investing in both British American and ES Ceramics at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining British American and ES Ceramics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between British American Tobacco and ES Ceramics Technology, you can compare the effects of market volatilities on British American and ES Ceramics and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in British American with a short position of ES Ceramics. Check out your portfolio center. Please also check ongoing floating volatility patterns of British American and ES Ceramics.
Diversification Opportunities for British American and ES Ceramics
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between British and 0100 is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and ES Ceramics Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ES Ceramics Technology and British American is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on British American Tobacco are associated (or correlated) with ES Ceramics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ES Ceramics Technology has no effect on the direction of British American i.e., British American and ES Ceramics go up and down completely randomly.
Pair Corralation between British American and ES Ceramics
Assuming the 90 days trading horizon British American Tobacco is expected to generate 0.15 times more return on investment than ES Ceramics. However, British American Tobacco is 6.75 times less risky than ES Ceramics. It trades about -0.25 of its potential returns per unit of risk. ES Ceramics Technology is currently generating about -0.14 per unit of risk. If you would invest 704.00 in British American Tobacco on November 28, 2024 and sell it today you would lose (24.00) from holding British American Tobacco or give up 3.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
British American Tobacco vs. ES Ceramics Technology
Performance |
| Timeline |
| British American Tobacco |
| ES Ceramics Technology |
British American and ES Ceramics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British American and ES Ceramics
The main advantage of trading using opposite British American and ES Ceramics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British American position performs unexpectedly, ES Ceramics can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in ES Ceramics will offset losses from the drop in ES Ceramics' long position.| British American vs. Awanbiru Technology Bhd | British American vs. Aurelius Technologies Bhd | British American vs. Resintech Bhd | British American vs. Duopharma Biotech Bhd |
| ES Ceramics vs. Press Metal Bhd | ES Ceramics vs. Carlsberg Brewery Malaysia | ES Ceramics vs. Kossan Rubber Industries | ES Ceramics vs. Ho Hup Construction |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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